INTERNSHIP REPORT

ON

NATIONAL BANK OF PAKISTAN

(MAIN BRANCH CHARSADDA)

SUBMITTED BY

AZIZ ULLAH JANROLL NO. 7, MBA (Finance) Final TERM

SUBMITTED TO

CONTROLLER OF EXAMINATIONSUNIVERSITY OF PESHAWAR

NATIONAL INSTITUTE OF MANAGEMENT SCIENCES PESHAWAR, PAKISTAN

JANUARY 2011

1

APPROVAL SHEET

INTERNSHIP REPORT

ON

NATIONAL BANK OF PAKISTAN(MAIN BRANCH CHARSADDA)

Submitted By

Aziz ullah Jan Roll No. 7, MBA (Finance) Final Term

Of

National Institute of Management Sciences Peshawar, Pakistan

Has been approved for submission to the controller of examinations, University of Peshawar in partial

fulfillment of the requirement for the degree of

MASTER OF BUSINESS ADMINISTRATION

____________________ _____________________Mr. Muhammad Aftab Mr. Muhammad Idress(Internal Supervisor) (Principal/Director)

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Date: _________________ Date: _________________

DEDICATION

To my loving PARENTS who always been a great

source of inspiration for me and their guidance and

advice always kept me on the right path and their

prayers and good wishes have been a source of great

strength for me.

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TABLES OF CONTENTS===========================================================S.No Title Pages No ============================================================

Acknowledgement I

Preface II

Executive Summary

Chapter -

1

INTRODUCTION TO THE REPORT1

1.1 Background of Study 1

1.2 Purpose of Study 1

1.3 Scope Of Study 1

1.4 Limitations of the Study 2

1.5 Methodology of Study 2

Chapter -

2

NATIONAL BANK OF PAKISTAN3

2.1 History Of NBP 3

2.2 Activities Performed By NBP 5

2.4 Objectives Of National Bank 7

2.5 Branch Network 7

Chapter -

3

ORGANIZATIONAL STRUCTURE OF NBP9

3.1 Head Office 9

3.2 Regions Of NBP 11

Chapter -

4

DEPARTMENTATION14

4.1 Departments of NBP Main Branch Charsadda 14

4.2 Deposits Department 14

4

4.3 Remittances Department 16

4.4 Advance Department 19

4.5 Cash Department 22

4.6 Government Collection Department 23

4.7 Clearance Department 23

Chapter -

5

FINANCIAL ANALYSIS25

5.1 Five Years Performance At A Glance 25

5.2 Ratio Analysis 26

5.3 Calculation of different ratios 26

Chapter-

6

FINDINGS AND

RECOMMENDATIONS 35

6.1 Recommendations 35

6.2 Conclusion 37

BIBLIOGRAPHY 39

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ACKNOWLEDGEMENTS

All praise is due to Almighty ALLAH, the most merciful and the most

beneficent, who’s invocation always makes us proud by succeeding in every field

through our performance and the ability, courage and patience to come up with the

best out put of our struggle.

Countless salutation is upon the holy prophet “Hazrat Muhammad” (SAWW), the

most perfect and a torch of guidance and knowledge for humanity as a whole.

I would like to thanks Hadayat Ali Chartered Accountant (Principal of Ali Associates

Chartered Accountants) and Tahir Muhammad (Office In charge) with the help of

whom this project gets the complete shape of success and its true color.

I would like to thanks Dr. Muhammad Idrees (Director of National Institute Of

Management Sciences Peshawar) and Mr. Kamal Khan (Co-ordinator) with the

effort of whom we are provided with the best education environment, which make us

proud to be the student of National Institute of Management Sciences Peshawar.

I am also in debt to my Internship instructor who encourages, helps and guided me

through every corner of difficulty that I have faced. He is the one leads us to correct

our mistakes and provide the maximum help to all the students.

I am greatly thankful to my teachers Mr. Farhad, Miss. Madiha, Mr. Muhammad

Aftab for their guidance and valuable suggestions.

Finally, I am also thankful to my friends especially Nauman, Aziz Ullah Jan,

Maqsood and Abdul Wahid for their good wishses and timely assistance in the

completion of this internship report.

I would feel it in complete without saying thanks to my loving Parents and Brother

Muddassir Khan who supports and encourage me throughout my educational career.

AZIZ ULLAH JAN

MBA Finance

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EXECUTIVE SUMMARY

This report highlights the main operation and functions, which are usually carried out

in a Chartered Accountant Firm. CA Firms mainly provides financial advisory and

consultancy services to its clients in the shape of Audit, Tax & Corporate Consultancy

Services.

All the CA firms acts under the umbrella of ICAP which is an autonomous body and

came into being through an Ordinance in 1961.

This report explains how different functions are carried out in a CA firm and what

consultancy services are being provided to the customers/ clients.

This report is based on the actual data which I collected during my stay in the Firm as

a management trainee.

The First Chapter is about the Introduction of the Report, the Second Chapter is about

the History of Chartered Accountants whereas the Third Chapter is about the History

of Auditing, Fourth about Procedure, Fifth about Taxation, Sixth about Financial

Analysis & Seventh about Findings, Conclusion and Recommendations.

During the critical review it was observed that Ali Associates Chartered Accountants

is one of the leading Firms with one of its branch in London (UK) as well.

The Organization is well established and managed by a team of competent manager

with great knowledge and skills in their relevant fields. The overall atmosphere is

employee friendly.

During my stay in the Firm I have witnessed a few shortcomings the recommendation

for removing that shortcomings in my opinion are as follows.

Strong need of decentralization

Apart from regular training schedule the firm should also arrange some

training workshops for their trainees in order to enhance their knowledge.

There must be proper reward system in order to motivate the employees.

The personnel policy should be well defined.

7

The managers should apply the Job rotation concept inside and outside the

organization.

Coordination among the employees & trainees should increase by arousing

Team spirit.

The firm should expand its operation to other countries. Especially to

Afghanistan.

The CA firm should expand its services.

Class differences should be minimized.

Process of hiring of trainees should be eased enough so that an average

student can get opportunity of training in the firm.

Equal opportunities should be provided to all trainee students during stay in

the Firm.

Trainees should have an access to all the records which can enhance their

knowledge & skills proficiency.

Managers should make it sure that senior trainees should transfer their

knowledge & expertise to the junior without any hesitation.

Most of the activities carried out manually should be computerized.

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CHAPTER - 1

INTRODUCTION TO THE REPORT

1.1 BACKGROUND OF STUDY

This report is about National Bank Pakistan. NBP was established in 1949 and since

then, it has expended its network, becoming the largest commercial Bank of the

country. It offers different products of services to its customers.

There are certain characteristics, which sets NBP apart from other nationalized

commercial banks. These characteristics are the reasons of the development of NBP.

The most important characteristic of NBP is that, it works, as an agent to the State

Bank, Where State Bank does not have a branch of its own. The NBP also act as a

trustee to the National Investment Trust (NIT), which is one of the premier financial

institutions of the country. It is charged the responsibility of mobilizing small

savings. The establishment of NBP thus signaled the achievement of another

milestone in the development of the banking industry in Pakistan.

1.2 PURPOSE OF STUDY

The purpose or objective of this report is to define and describe different functions

and products offered by the bank to its valued customers, to identify some weaknesses

related to the management of the Bank, to analyze the performance of the Bank and

finally to give some necessary recommendation to the management of the bank. This

study can help the students of IBMS in making their reports about their organization.

My internship in NBP had certain objectives such as:

Observe the work in different departments of NBP.

Develop the relationship to get more information.

Apply managerial skills in real work place.

Getting confidence while interviewing the heads of the different departments.

Develop analytical skills for organizational analysis and financial analysis etc.

1.3 SCOPE OF STUDY

As an internee in National Bank of Pakistan Main Branch Charsadda the main focus

of my study research was on general banking procedures in one of the branches of

NBP. I did my practical work in four (4) departments.

9

Deposit Department

Remittances Department

Establishment and Advances Department

Clearance & A/C Opening department

While working in these departments I have identified problems and gave

recommendations to overcome these problems. I have done comparative analysis of

three years financial statements and SWOT analysis of NBP Main Branch Charsadda.

An overview of the five year performance of the overall NBP is also included.

1.4 LIMITATIONS OF THE STUDY

The vast scope of the operations of a bank is difficult to be analyzed in a limited time

of two months. The lack of information is another limitation of the study.

1.5 METHODOLOGY OF STUDY

During my internship in NBP Main Branch Charsadda the most important task was to

collect as much quality information about the organization as possible. Due to this

reason I used a number of techniques to collect the required material and compile the

report. The methodology, which I adopted for this research, is based on both the

primary data as well as secondary data.

1.5.1 The Sources of Primary Data

Interviews with bank employees.

Personal observations.

1.5.2 The Source for Secondary Data

Annual Reports

Manuals of departments about Report writing

Relevant books

Brochure and circulars of the bank

Internet

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CHAPTER - 2

NATIONAL BANK OF PAKISTAN

2.1 HISTORY OF NBP1

National bank of Pakistan was established in 1949. The government controlled

National Bank of Pakistan has played a unique role both as a commercial bank and as

a trustee of pubic finances. Operating through a network of 1225 domestic and 24

overseas branches it has been at the forefront of national economic development. Its

contribution in the development of small and medium size entrepreneurs is

significant. It is credited with introducing such innovative schemes as People’s Credit

Scheme (1960), supervised Agricultural Credit Programmed (1972) and educational

loans on compassionate grounds.

2.1.1 Formative Phase 1950s

The Bank as originally conceived was allowed an authorized capital of Rs. 60 million.

In December 1960 capital was reduced to Rs. 30 million (NBP (Amdt) Ordinance

1960). The Bank was setup with an issued capital of Rs. 15 Million of which the

government paid 25 percent, the balance was offered to the public. The shares offered

to the public were floated in 1950 and were promptly taken up. In the same year NBP

Ordinance was amended so that it could take up ordinary commercial banking

business. In 1952 it was felt that the consolidation achieved by National Bank,

justified the transfer of the agency of the State Bank for government business from

Imperil Bank to this National Institution. As such the National Bank started taking

over the government treasury work from Imperil Bank of India in May 1952 and

success fully completed the process by end of September. In 1951 NBP started

foreign exchange business.

The Bank under took a program of expansion. Branch network was expanded and by

1959 it had 129 branches at carefully selected locations in both wings of county as

against only 17 in 1950. Its geographical development extended abroad beginning

with the establishment of its first overseas branch at Jeddah, Saudi Arabia in 1950 for

the specific purpose of providing sterling exchange facilities to bankers and

moneychangers having Pilgrim Notes. In view of the some of business available, the

1 http://www.nbp.com.pk

11

Central Board decided to maintain it permanently. In 1955 Jeddah Branch started

general banking business. The Bank opened another foreign branch in London in

1953 and in Baghdad in 1957; the later was subsequently closed owing to

nationalization of Banks.

Even in its developmental stage the Banks profit record was extraordinary, it earned

profit in the very first five months of its commencing business and maintained a

continuous progress ever since. From a profit of Rs. 0.3 million in 1950 it rose to Rs.

5.4 million by 1952 and further to Rs. 10.2 million by 1959.

2.1.2 Period of Reorganization/ Development: 1970s

The 1970s witnessed the nationalization of Pakistani commercial banks operating in

the county. On January 1, 1974 National Bank of Pakistan along with 13 other

scheduled Pakistani banks were nationalized by the promulgation of the Banks

(Nationalization) Ordinance 1974 (Ordinance No. 1 of 1974). Shares not formerly

held by the Government were acquired from the private holders after compensating

them. Its present shareholding is; 93.4 percent is held by the State Bank of Pakistan,

5.3 percent by Government of Pakistan and 1.3 percent by others. An Executive

Board headed by the President and four members replaced the previous Board of

Directors. Under the provisions of the Banks (Nationalization) Act, 1974 the safety of

all deposits with the bank (including deposits held with foreign branches) stood

guaranteed by the Government of Pakistan.

According to the Banks (Amalgamation) Scheme 1974, framed by the Pakistan

Banking Council in April 1974 in consultation with State Bank of Pakistan, Bank of

Bahawalpur Ltd. was amalgamated with National Bank of Pakistan with effect from

June 30, 1974.

A noteworthy development during this period was the establishment and operation of

a project for Agricultural Credit by the Bank in the year 1972. It was felt that in the

process of modernization of the agricultural sector, the credit system plays a major

part and could contribute better in brought within an institutional framework. There

was a need to evolve a concept, which was not only operationally feasible but which

served the multitude of small farmers in the vast countryside. National Bank of

Pakistan evolved such a concept the Supervised Agricultural Credit Program. This

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was highly appreciated by international experts and later adopted by other Pakistani

Banks.

2.2 ACTIVITIES PERFORMED BY NBP

Since NBP is a commercial bank, it performs a variety of functions. Like other

commercial banks, NBP is engaged in financing international trade. Its other major

functions include receiving deposits, advancing loans and discounting of exchange.

The functions performed by NBP are:

2.2.1 Accepting Deposits

This function is important because banks largely depend on the funds deposited with

them by its customers. Deposits are of many types:

i. Current deposits

Current deposits are also called demand liability on current deposits. NBP pays

practically no interest on current deposits. Businessmen usually open current

accounts. In NBP current account can be opened with a minimum amount of Rs.500/-.

ii. PLS saving deposit

Profit and loss sharing deposits (PLS) are also called checking accounts. One can

deposit and draw money easily. Profit on PLS is calculated every month but paid after

six months. PLS account can be opened with a minimum amount of Rs.500/-

iii PLS term deposits

Fixed term deposits are deposits with the bank for certain fixed period before the

expiry of which they cannot be withdrawn unless giving due notice. In this case the

rates of profit will be different depending upon the time period.

2.2.2 Discounting bills of exchange

Discounting of bill is practically speaking lending for exchange at their market rate

i.e. it pays to holder of the bill an amount equal to the face value after deducting

interest at the current market rate for the period. This bill has to be mature. This is the

common way used for keeping a part of assets of the bank in a liquid form.

2.2.3 Agency service

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NBP also provides best and unique service to its valued customers. NBP provide the

following agency services to the customers:

i. Collection of dividends

As NBP deals with the purchase and sale of various types of securities, therefore NBP

also provide dividend or interest earned on share or bonds or invested money.

ii. Collection of Cheques

In the collection and payment of Cheques, bills and promissory notes etc. National

bank of Pakistan acts as an agent for its customers.

iii. Acting as an agent

NBP also acts as an agent correspondent for its customer at home or abroad

iv. General utility services:

Utilities provided by NBP are as follows:

a. Clearance of utility bills

NBP provides the service of clearing the utility bills i.e. electricity, gas and telephonebills of its customers. For this purpose it also provides evening banking services.

b. Lockers facility

National bank of Pakistan also provides locker facilities to its customers to keep their

valuable assets in it. The charges of different size of lockers are different.

c. Acts as a referee

NBP provides useful services to its customers by acting as a referee to their credit

worthiness.

d. Supply of information

NBP provides operational and advisory service for foreign exchange accounts/

activities.

2.4 OBJECTIVES OF NATIONAL BANK

14

Objectives are ends towards which an enterprise activity is aimed. The purpose of

business is production and marketing of economic goods and services but to

accomplish these objectives to a number of enterprise objectives may be necessary.

National bank of Pakistan has certain objectives. These objectives are

Advancing loans

Accept deposits

Remitting of funds

Sale of promissory notes

Selling and realizing property of bank claims

Investment or underwriting of stocks

2.5 BRANCH NETWORK

With the geographical development of its branches, the Bank has been able to extend

its services to a much larger number of Pakistanis all over the country. Today it has

more than 8.5 million accounts. Bank maintains its presence in all the major financial

centers of the world through its 15 overseas branches and 5 representative offices. Of

these, three representative offices have recently been set up at Tashkent (Uzbekistan),

Baku (Azerbaijan) and Almaty (Kazakhstan) to take advantage of the emerging

opportunities in CIS countries. Bank’s role globally is well assisted by its network of

correspondent banks located strategically in Asia, America, Europe and Africa.NBP

has an extensive domestic branch network of over 1200 branches located all over

Pakistan. The Bank also has a presence in 18 international locations including the

USA, United Kingdom, Europe and the Far East.

15

CHAPTER - 3

ORGANIZATIONAL STRUCTURE OF NBP

Organizational structure is the framework that defines the boundaries of the formal

organization and with which the organization operates. A suitable organizational

structure for the nature of the organization leads to better performance.

The new organizational structure of the bank constitutes a board of directors and an

executive committee as the governing bodies. The head office is operationally in

charge of central affairs including the delegation of power and authority to the

regional headquarters all over the country. Regional headquarters direct the function

of corporate branches.

3.1 HEAD OFFICE

The NBP has its own organizational structure and its Head Office is situated at

Karachi. All branches, regional offices and corporate branches work according to the

rules and regulations issued by the Head Office from time to time. The Head Office of

National Bank of Pakistan, which is primarily responsible for making policies and

execution of policy decision include,

Board of Directors

Executive Committee

Divisional head offices and provincial headquarters

The Head Office has nine divisions, which are further divided into different wings. It

is operationally in charge of central affairs including the delegation of powers and

authority to the 29 Regional Headquarters all over the country. These Regional

Headquarters direct the functions of the 12 corporate branches.

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ORGANIZATIONAL STRUCTURE OF NBP HEAD OFFICE

3.1.1 Board of Directors

In the management of banks, the board of directors is at the top of the controlling

bodies. Since there are no private shareholders now, so there is no general meeting of

the shareholders and there are no elected directors. The board now consists of a

nominated president, a secretary and other members. The secretary of the board

presents the annual report of the bank. The board has limited administrative powers.

Board members of NBP is led by the chairman who is the president and is the Chief

executive officer (CEO) of the bank, together with a selected group of six directors,

who bring with them vast experience and qualities. The government appoints these

directors.

The Board of Directors of National Bank of Pakistan NBP has one President and six members

as given below:

President of the bank 1

SEVPs of the bank 3

Representative of the PBC 1

Representative of government 1

Outsiders 1

Total 7

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BOARD OF DIRECTORS

PRESIDENT

EXECUTIVE COMMITTEE

SEVPs/CHIEF SIND AND

BALUCHISTAN

SEVPs/CHIEF

PUNJAB

SEVPs/CHIEF NWFP OF AJK

SEVPs

WINGS

SEVPs

WINGS

ORGANIZATIONAL STRUCTURE OF BODS

The board of directors of NBP and its organizational structure is given below:

3.1.2 Executive Committee

Executive Committee consists of one President and nine members and among these

nine members, one member perform functions of both member and Secretary. Board

of Directors nominates executive committee and executive committee nominates the

divisional heads. NBP has an executive committee with President as its chairman; five

SEVPs are its members and president’s advisor as an observer. This body monitors

the day-to-day affairs of the entire bank and has sanctioning authority for financial

and business proposals.

3.2 REGIONS OF NBP

On May 13, 2005 a circular was issued in which zones were abolished and the whole

country and Azad Kashmir was divided into 29 regions. The changeover process

started from 1st August 2004 and was completed by 31st August 2005. The new setup

18

Syed Ali Raza (President)

Dr. Waqar Masood Khan (Director)

Abdul Razzaq Tabba (Director)

Kamran Mirza(Director)

Rizwan A. Kehar (Director)

Sheikh Humayun Syeed(Director)

Qazi Faez Isa (Director)

S.M. Rafique (Secretary)

Source: Annual Report of NBP 2009

was made fully functional by 15th September. The National Bank has 29 regions

(circles) in four provinces and Azad Kashmir.

Regional Management Committee

A regional management committee controls all regions. Regional management

consists of

Regional Business Chief

Regional Operations Chief

Risk management Chief

Compliance Chief

The names of the regions are:

S.No.

Region S.No.

Region

1 Karachi South 2 Karachi Central

3 Federal Capital 4 Karachi West

5 Rawalpindi 6 Lahore East

7 Faisalabad 8 Gujranwala

9 Peshawar 10 Mirpur A.K.

11 Multan 12 Gujrat

13 Sialkot 14 Hyderabad

15 Abbotabad 16 Sargodha

17 Mardan 18 Jhelum

19 Quetta 20 Sahiwaal

21 Bhawalpur 22 Dera Ghazi Khan

23 Dera Ismail Khan 24 Jhang

25 Muzaffarabad A.K. 26 Sakkhar

27 Larkana 28 Gawadar

29 Gilgit **** ****

19

ORGANIZATIONAL STRUCTURE OF REGIONS OF NBP

\Organizational Structure of NBP Main Branch, Charsadda

20

Branch Manger

Operations Manager

Compliance

IT-System Operation and Maintenance

Customer Service

Department

Cash

Opening/Closing of Accounts Maintenance of Accounts

Term deposits/MIS/NIDAChequebook Issuance

Payment Order/Drafts

TTs/MTs

Clearing

Pensions

Credit Disbursement

Collection

Computer Input

Cash Receipts

Cash Payment

Utility Bills

Govt. Collections

President

Corporate and Investment

Banking Group Chief

Corporation North and

Corporation Head South

Corporate Branches

Regional Marketing Manager

Regional Business Chief

Commercial & Rental Banking Group Chief

Regional Operations Chief

Branch ManagerOperate Group Chief

Operation Deptt. of the Region

Branch Operation Manager

Regional Compliance Chief

Risk Management Group Chief

Regional Risk Management Chief

Credit Department of the Region

Branch Credit Officer

CHAPTER -4

DEPARTMENTATIONDepartmentation is arranging the activities into meaningful groups. It distributes the

workload and increases efficiency and effectiveness. Departmentation can be done on

various bases for example, departmentation for customers, by function or by location.

National bank of Pakistan, Main Branch Charsadda consists of various departments

based on its different functions. So it can be said that the basis for departmentation at

NBP is purely functional.

4.1 DEPARTMENTS OF NBP MAIN BRANCH CHARSADDA2

NBP Main Branch Charsadda is operating following departments

Deposits Department.

Remittances Department.

Advance Department

Cash Department.

Govt. Collection Department

Clearance Department

All the departments will be discussed in detail below:

4.2 DEPOSITS DEPARTMENT

The principle source of funds of any commercial bank is the deposit account i.e.

demand, saving and time deposits. From banking point of view, the term deposit

means “the currency, Cheques, or draft given to a financial institution for crediting to

a customer’s account”.

Like all commercial banks, the primary function of National Bank of Pakistan is to

accept and receive surplus money from the people. In order to attract money it offers

different types of facilities to its customers.

2 NBP Annual report, 2008

21

The deposit department of national bank of Pakistan Main Branch Charsadda mainly

performs the function of:

Opening of Accounts

Closing of Accounts

Issuance of Cheque book

Issuance of Statement of account

Local currency accounts are discussed as follows

4.2.1 Types of Local Currency Accounts

1) Current Account

A current account is a running account, which is continuously in operation. NBP

current account allows customers to deposit and withdraw cash at their own

convenience. The customer can withdraw the current deposits anytime, without any

previous notice to the bank. The bank has to honor the cheques to the extent of credit

balance in the account. No profit/interest is paid to the customer on these deposits, but

the customer is required to maintain a minimum balance in the account. The initial

amount required for opening of such an account is, Rs. 5,000. It is opened with Rs

500 only. If balance is less then Rs 5000 than bank deduct Rs 150 twice in a year as

bank charges. The current account is opened and operated by traders, business

companies, public service bodies, industrialists etc.

2) PLS Saving Account

Saving deposits or profit and loss sharing (PLS) are those accounts on which bank

offers a relatively lower rates of interest. PLS saving account can be opened with an

initial deposit of not less than Rs. 500. Profit is credited to the client’s account at the

end of June and December after H.O circular. Withholding tax is deducted on profits.

Zakat is also applicable on or certain balance. Prior notice required to cash larger

amounts. Simply on PLS Account NBP gives 1.50 % annual profit on the minimum

balance of the accounts at the end of each month.

PLS Saving Account may be opened in the name of an individual or jointly in the

name of two or more persons. Charitable institutions, companies, Associations,

22

Societies, Educational institutions, firms etc, may also open these accounts. Minors

and illiterates are also eligible for opening saving accounts. However illiterate

customer must present themselves in person for withdrawals. The bank determines the

rate of profit or loss on PLS saving account.

3) Term Deposit Account

These are the deposits than can be withdrawn after a certain specified period of time.

The period of time varies from three months to five years. On these deposits

return/interest varies with the duration for which the amount is kept with the bank.

The rate of interest/return on term deposit is higher than that of a saving deposit. Its

interest/return is unaffected for the duration of the deposit irrespective of market

fluctuations.

Term deposit is best suited for short-term investment. Individuals as well as joint

account an be opened by, sole proprietorships, partnerships, joint stock companies,

limited companies, clubs/associations/trusts, administration, executors etc. Profit is

paid at the maturity of deposit. On these deposits premature withdrawal is permitted

but against a reduced rate of interest as agreed at the time of deposit.

4) Finance Facility

Bank also extends finance facility to clients against saving and fixed term deposits on

comparatively low markup rate. The deposit is kept under lien, however the customer

may withdraw the profit amount credited to his account

5) Call Deposits/ Security Deposit:

This is a security deposit usually initialized by Govt./ Private contractors for auctions

etc. This CDR is submitted along with quotation to the concerned department or

organization etc. Banks do not pay interest on this deposit. This CDR is non-cashable

but only when the concerned person or department releases it, in whose favor it is

issued.

4.2.2 Classification of Accounts

1) Individual Accounts

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Individual accounts as the name implies can be opened and operated by a single

person. Single person operates such accounts. Copy of Identity card and proper

introduction is required for this account as well as for all of the following accounts.

2) Joint Accounts

Two to four persons can open this type of account. If more than 4 person want to open

joint account then they can open only current account. Joint account is opened by two

or more persons jointly. Special instructions are obtained to operate the account

whether singly or jointly and Either or survivor. Then all the account holders must

verify it by countersigning the said instruction. These accounts should not be

confused with partnership accounts.

3) Partnership Accounts

Partnership Account may be operated by a partnership of two or more persons. For

this account a partnership deed is required. These accounts are opened in the name of

business. Minimum two and maximum twenty people are allowed. Special

instructions to operate accounts must be countersigned by all the partners through

Resolution. The partnership deed is required if the bank deems necessary. Partnership

dissolves in case any of the partner’s dies retires, becomes insolvent or lunatic or a

new partner is admitted to the firm. Partnership account can only open a current

account.

4) Minor Accounts

According to Pakistani law, a person is regarded as a minor until he has attained the

age of 18 years. Under section 3 of majority Act 187, if a competent court of law

appoints a guardian of his person or property before his eighteen years, the majority

extends to the age of 21 years.

5) Staff Accounts

Staff account is maintained for the employees of the NBP. Salaries of the staff are

credited to their account.

4.3 REMITTANCES DEPARTMENT

The word “Remittance” means to send money by mail or any other method. It may

also be defined as “Payments send by mail to a center for processing”. National Bank

24

of Pakistan also provides the facility of transfer of funds from one bank to other and

from one place to another place. The transfer of funds is mainly the responsibility of

the remittances department.

At NBP Charsadda Branch, remittances are made in the following manners.

1. Telegraphic transfer (T.T)

2. Mail Transfer (M.T)

3. Demand Draft (D.D)

4. Payment Order

5. Cheque collection

1. TELEGRAPHIC TRANSFER (T.T)

It is the fastest made of transfer of money. Sometimes when the remitter urgently

desires the remittance, he may request to issue a telegraphic transfer. TT may be

issued to general public on their written request and against the value received. The

customer fill the forms and deposits cash. The official of National bank of Pakistan

send instruction regarding payment to the drawee branch telegraphically in a coded

language and under confidential number known as TEST NUMBERS. Or telephone

call is made to the said branch, they make payment to customer. Vouchers are sent by

ordinary mail to keep the record. Telephone charges are also taken from customers.

2. MAIL TRANSFER

Mail Transfer (MT) is a mode of transferring money from one branch to another

branch either within the same city or in cities through out country. MT advises are

dispatched by mail. MTs may be issued for transferring funds in one account to

another branch or to another branch or to any person not requiring urgent remittance

or draft.

Customer fills same application and he deposit the cash in the same way. National

bank of Pakistan official record the transaction vouchers and advises are made and

sent to responding branch. National Bank of Pakistan takes Rs.10 as mail charges

from application.

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3. PAYMENT ORDER

Payment order is made for local transfer of money. Pay order is the most convenient,

simple and secure way of transfer of money. NBP takes fixed commission of Rs. 75

per payment order from the account holder and Rs. 100 from a non-account holder.

4. DEMAND DRAFT (DD)

Demand draft is a popular mode of transfer. The customer fills the application form.

Application form includes the beneficiary name, account number and a sender’s

name. The customer deposits the amount of DD in the branch. After the payment the

DD is prepared and given to the customer. NBP officials note the transaction in

issuance register on the page of that branch of NBP on which DD is drawn and will

prepare the advice to send to that branch. The account of the customer is credited

when the DD advice from originating branch comes to the responding branch and the

account is debited when DD comes for clearance. DD are of two types.

a) Open DD: Where direct payment is made.

b) Cross DD: Where payment is made though account.

5. CHEQUE COLLECTION

“A Cheque may be defined as a written order of a depositor upon a bank to pay to or

to the order of a designated party or to a bearer, a specified sum of money on

demand.” Cheque is received form the customer by the bank and branch-crossing

stamp on the face of the cheque is checked. Cheque is received along with deposit

slip.

CLEARING OF CHEQUES

Clearing of cheques is made through SC (short credit), LSC (Local short credit) in

clearing house.

i. SC (Short Credit)

SC is the short credit, which consists of the cheque outside the district. These cheques

are sent in SC outside the district for clearance. Once they are cleared bank charge a

certain amount of money spent on the process form the customer.

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ii. LSC (Local Short Credit)

LSC is the short credit, which consists of the cheques inside the district. Separate

register is maintained for it. Local branches for clearance send these cheques for

clearance. Bank has no charges on the process form the customer.

4.4 ADVANCE DEPARTMENT

Advances department is one of the most sensitive and important departments of the

bank. The major portion of the profit is earned through this department. The job of

this department is to make proposals about the loans. The Credit Management

Division of Head Office directly controls all the advances. As we known bank is a

profit seeking institution. It attracts surplus balances from the customers at low rate of

interest and makes advances at a higher rate of interest to the individuals and business

firms. Credit extensions are the most important activity of all financial institutions,

because it is the main source of earning. However, at the same time, it is a very risky

task and the risk cannot be completely eliminated but could be minimized largely with

certain techniques.

4.4.1 TYPES OF CREDIT FACILITY

In addition to purchase and discounting of bills, bankers in Pakistan generally lend in

the form of cash finance, overdrafts and loans. NBP provides advances to different

people in different ways as the case demand.

Cash Finance

Running Finance

Demand Finance

a) Cash Finance

This is a very common form of borrowing by commercial and industrial concerns and

is made available either against pledge or hypothecation of goods, produce or

merchandise. In cash finance a borrower is allowed to borrow money from the banker

up to a certain limit, either at once or as and when required. The borrower prefers this

form of lending due to the facility of paying markup/services charges only on the

amount he actually utilizes.

27

If the borrower does not utilize the full limit, the banker has to lose return on the un-

utilized amount. In order to offset this loss, the banker may provide for a suitable

clause in the cash finance agreement, according to which the borrower has to pay

markup/service charges on at least on self or one quarter of the amount of cash

finance limit allowed to him even when he does not utilize that amount.

The bankers allow their customer to draw funds from their Cash Finance Accounts

after sanction of proper limit following complete credit investigation and

documentation formalities. The cash is with drawn from these accounts by Cheques

and the debit balance remains with in the sanctioned limit and the value of the stock is

maintained. The debits into the accounts consists of :

Disbursement installments

Bank charges such as godown expenses, insurance, telephone, fax/telex charges

and postage charges.

Markup

b) Overdraft/Running Finance

This is the also a common form of bank lending. When a borrower requires temporary

accommodation his banker allows withdrawals on his account in excess of the balance

which the borrowing customer has in credit, and an overdraft thus occurs. This

accommodation is generally allowed against collateral securities. When it is against

collateral securities it is called “Secured Overdraft” and when the borrowing customer

cannot offer any collateral security except his personal security, the accommodation is

called a “Clean Overdraft”. The borrowing customer is in an advantageous position in

an overdraft, because he has to pay service charges only on the balance outstanding

against him. The main difference between a cash finance and overdraft lies in the fact

that cash finance is a bank finance used for long term by commercial and industrial

concern on regular basis, while an overdraft is a temporary accommodation

occasionally resorted to.

The facility by way of Running Finance is extended to meet the working capital

requirements of the customer. It may be of temporary nature or may be available as

regular credit line.

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Temporary Running Finance should be made available only sparingly and to

customer with an established market reputation. By the very nature of its title, the

facility is extended for a short period.

Regular Running Finance Limits should be backed by appropriate approval either

under discretionary power or limits sanctioned by the Credit department/Credit

Committee.

Following factors/elements should be kept in mind while sanctioning Running

Finance:

The purpose and consideration for the facility should be clearly spelled out.

The advance should be business-related.

The credit worthiness of the customer should be undoubted.

It would be prudent to obtain credit reports on the customer from their other

bankers.

The facility may be secured by one or more type of securities. It is essential that the

security and charge documentation formalities should be completed prior to the

disbursement of the facility. It may almost become impossible to obtain perfect

securities once the borrower is allowed to make the drawings

c) Demand Financing/Loans

When a customer borrows from a banker a fixed amount repayable either in periodic

installments or in lump sum at a fixed future time, it is called a “loan”. When bankers

allow loans to their customers against collateral securities they are called “secured

loans” and when no collateral security is taken they are called “clean loans”.

The amount of loan is placed at the borrower’s disposal in lump sum for the period

agreed upon, and the borrowing customer has to pay interest on the entire amount.

Thus the borrower gets a fixed amount of money for his use, while the banker feels

satisfied in lending money in fixed amounts for definite short periods against a

satisfactory security.

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4.5 CASH DEPARTMENT

The basic goal or objective of the banks is to earn profit, and cash department plays

an important role in this matter. The bank receives cash from the clients and invests it

in business.

4.5.1 FUNCTIONS OF CASH DEPARTMENT

Cash department performs the following functions

1. Receipt

The money, which either comes or goes out from the bank, its record should be kept.

Cash department performs this function. The deposits of all customers of the bank are

controlled by means of ledger accounts. Every customer has its own ledger account

and has separate ledger cards.

2. Payments

It is a banker’s primary contract to repay money received for this customer’s account

usually by honoring his cheques.

3. Collection of Bills

The cash department of branch also collects the bills of Sui gas, PTCL, NTC and

PESCO.

4. Saving Cash

The officer checking cash physically in the afternoon before the cash is put in the

safe. The loose and unstitched notes of all denominations as well as stitched notes of

Rs500, Rs1000 and Rs100 are physically counted. In addition the number of stitched

bundles and sealed bags containing coins are properly checked and tallied with the

cash position.

5. Defective and Cut Notes

Branch makes sure that defective and cut notes are not issued to the customers. For

this purpose branch collects sufficient fresh and reissue able notes from the main

branch to meet the requirements of the customers.

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6. Cheques and their Payment

The Negotiable Instruments. Act, 1881, “Cheque is a bill of exchange drawn on a

specified banker and not expressed to be payable otherwise than on demand”2.

Since a Cheque has been declared to be a bill of exchange, it must have all its

characteristics as mentioned in Section 5 of the Negotiable Instruments Act, 1881.

Therefore, one can say that a Cheque can be defined as an: “An unconditional order

in writing drawn on a specified banker, signed by the drawer, requiring the banker to

pay on demand a sum certain in money to, or to the order of, a specified person or to

the bearer, and which does not order any act to be done in addition to the payment of

money”. (Law of Banking by Dr. Hart, p.327).

4.6 GOVERNEMNT COLLECTION DEPARTMENT

4.6.1 GOVERNMENT COLLECTIONS/ RECIEPTS

NBP Main Branch Charsadda carries the responsibility of Govt. collection and

perform different services for Govt. NBP collects taxes, duties, challans, renewal of

weapons and collection of utility bills which includes Sui Gas, PTCL and PESCO

bills. This department also collects the dues of the educational institutes.

6.6.2 GOVERNMENT PAYMENTS

This department also performing the function of payments of salaries, payment of

zakat and payment of pensions and salaries to Air Force, Army and civilians is given

through Govt. Department. For this purpose pension books are issued to the

pensioners. The record of the accounts is also maintained in this department.

4.7 CLEARENCE DEPARTMENT

A clearing house is an association of commercial banks set up in given locality for the

purpose of interchange and settlement of credit claims. The function of clearinghouse

is performed by the central bank of a country by tradition or by law. In Pakistan, the

clearing system is operated by the SBP. If SBP has no office at a place, then NBP, as

a representative of SBP act as a clearinghouse.

After the World War II, a rapid growth in banking institutions has taken place. The

use of cheques in making payments has also widely increased. The collection as

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settlement of mutual obligations in the form of cheques is now a big task for all the

commercial bank. When Cheque is drawn on one bank and the holder (payee)

deposits the same in his account at the bank of the drawer, the mutual obligation are

settled by the internal bank administration and there arises no inter bank debits from

the use of cheques. The total assets and total liabilities of the bank remain unchanged.

In practice, the person receiving a Cheque as rarely a depositor of the cheque at the

same bank as the drawer. He deposits the cheque with his bank other than of payer for

the collection of the amount. Now the bank in which the cheque has been deposited

becomes a creditor of the drawer’s bank. The depositor bank will pay his amount of

the cheque by transferring it from cash reserves if there are no offsetting transactions.

The banks on which the cheques are drawn become in debt to the bank in which the

cheques are deposited. At the same time, the creditors’ banks receive large amounts of

cheques drawn on other banks giving claims of payment by them.

The representatives of the local commercial banks meet at a fixed time on all the

business days of the week. The meeting is held in the office of the bank that officially

performs the duties of clearinghouse. The representatives of the commercial banks

deliver the cheques payable at other local banks and receive the cheques drawn on

their bank. The cheques are then sorted according to the bank on which they are

drawn. A summary sheet is prepared which shows the names of the banks, the total

number of cheques delivered and received by them.

4.7.1 FUNCTIONS OF CLEARING DEPARTMENT

These functions are:

To arrange the payment of cheque drawn on the branch and give cheque for

collection to any other branch of National bank of Pakistan or any other

member or sub member of local clearinghouse.

To collect amounts of cheques drawn on members of local clearinghouse sent

for collection by National bank of Pakistan branches.

32

CHAPTER - 5

FINANCIAL ANALYSIS

Financial analysis, though varying according to the particular interests of the analyst,

always involves the use of various financial statement primarily the balance sheet and

income statement. The balance sheet summarizes the assets, liabilities, and owner’s

equity of a business at a point in time, and thee income statement summarizes

revenues and expenses of the over a particular period f time. A conceptual framework

for financial analysis provides the analyst with an interlocking means for structuring

the financing.

Parties interested in Financial analysis

Financial analysis can be undertaken by management of the firm, or by parties

outsides the organization via, owners, creditors, investor and others, the nature of

analysis depends on the purpose of the analyst.

Trade creditors

Suppliers of Long-term

Investors

Management of the firm

5.1 FIVE YEARS PERFORMANCE AT A GLANCE

(Source Annual reports 2009)

2005 2006 2007 2008 2009

33

From the above table it is very much clear that the NBP performance is going higher

and higher. Total assets are at the crest in 2009. The number of deposits and advances

are continuously increasing. Similarly the shareholder’s equity increased every year.

If we draw a graph this will shows that the graph is upward trend. Profit is increasing

from year 2007 to year 2008, but decreased in year 2008 and 2009. NBP increase the

number of its branches and employees over the years because large networks of

banks.

5.2 RATIO ANALYSIS

Ratio analyses are the most popular form of analyses all over the world and the

trusted one also. In ratio analyses as the name suggests ratios are used in analyzing the

financial standings of the organization.

Ratio analysis is a powerful tool of financial analysis. A ratio is defined as:

“The quotient of two mathematical expressions”

OR

“The relationship between two or more elements”

In financial ratio analysis a ratio is used as benchmark for evaluating the financial

position and performance of a firm.

5.3 CALCULATION OF DIFFERENT RATIOS:

Here we are going to calculate different ratios, which include both the balance sheet

and income statement ratios. These ratios are quite important for analyzing the

financial position of a firm.

These ratios are calculated for the years 2007, 2008 and 2009 from the ‘balance

sheet’ and ‘profit and loss statement’ of NBP.

i) Current Ratio:

The current ratio is the ratio of current assets to current liabilities.

Current AssetsCurrent Ratio = ----------------------------

Current Liabilities

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Short-term creditors prefer a high current ratio since it reduces their risk. Shareholders

may prefer a lower current ratio so that more of the firm's assets are working to grow

the business. Typical values for the current ratio vary by firm and industry. For

example, firms in cyclical industries may maintain a higher current ratio in order to

remain solvent during downturns.

Current ratio of NBP for the years 2007, 2008 and 2009 are given below:

NBP CURRENT RATIO

2007 2008 2009

Current Assets / Current Liabilities

380,198,374 / 39,602,271

411,964,522 / 43,133,328

521,162,257 / 49,901,121

Current Ratio 9.6 9.5 10.4

Interpretation:

The current ratio of NBP is quiet high because of huge current assets. The ratio is 9.6

in 2007 and 9.5 in 2008. While in 2009 it moves to 10.4. This means that for every 1

rupee liability of the bank it has 10.4 rupees, which is cover from current assets.

ii) Cash Ratio:

Finally, the cash ratio is the most conservative liquidity ratio. It excludes all current

assets except the most liquid: cash and cash equivalents.

The cash ratio is defined as follows:

Cash Cash Ratio = ----------------------------- Current Liabilities

The cash ratio is an indication of the firm's ability to pay off its current liabilities if for

some reason immediate payment were demanded. NBP cash ratios are:

35

NBP CASH RATIO

2007 2008 2009

Cash /

Current Liabilities

119,266,906 / 39,602,271

132,346,081 / 43,133,328

144,848,364 / 49,901,166

Cash Ratio 3.01 3.06 2.90

Interpretation:

The cash ratio of the bank is 3.02, 3.06 and 2.9 in 2007, 2008 and 2009 respectively.

This shows an increase in 2008 and a decrease in 2009. This means that for every

rupee of liability bank has 2.9 rupees to cover that liability from cash only.

iii) Advances Turnover (Receivables Turnover)

Receivable turnover or Advances turnover provides insight into the quality of the

firm’s receivable or advances and how successful the firm is in its collection. It is

often reported in terms of the number of days that advance (or credit sales for

manufacturing firm) remain in accounts receivable before they are collected. This

number is known as the collection period.

It is calculated by:

Mark-up or Interest EarnedAdvances Turnover Ratio = --------------------------------------

Advances

Here is the calculation of advances turn over ratio for NBP:

NBP ADVANCES (RECEIVABLE) TURNOVER RATIO

2007 2008 2009

Markup or Interest Earned / Advances

44,100,934 / 316,110,406

50,569,481 / 340,318,930

60,942,798 / 412,986,865

Receivable Turnover 0.14 or 14 % 0.15 or 15% 0.15 or 15%

Interpretation:

The advance turnover ratio of NBP for the years 2007 to 2009 is quite close to each

other. There is 0.01% improvement in 2008 as compare to 2007 but it remains

36

constant in 2009. This shows that the turnover of the advances is almost the same for

these years.

iv) Total Asset Turnover

Generally the total assets turnover measures the activity of the assets and the ability of

the firm to generate sales through the use of the asset. Asset turnover ratio is

calculated by:

Markup or Interest EarnedTotal Asset Turnover Ratio = ------------------------------------ Total Assets

Here is the calculation of total asset turnover for NBP

NBP TOTAL ASSET TURNOVER RATIO

2007 2008 2009

Markup Or Interest Earned / Total Assets

44,100,934/ 81,959,118

50,569,481/ 116,337,654

60,942,798/ 102,459,218

Asset Turnover 0.54 or 54% 0.43 or 43% 0.59 or 59%

Interpretation:

The asset efficiency of NBP has a mix trend in 3 years. Asset efficiency in 2008 is

less as compare to the asset efficiency in 2007 i.e. it is 0.54 in 2007 and 0.43 in 2008.

But again in 2009 it is jumped to 0.59. Which shows that NBP utilized fewer assets to

generate more interest in 2009 and 0.59 interest is earned per rupee of asset investment.

v) Fixed Assets Turnover

Sometimes it is needed to find the efficiency of fixed assets to generate interest

revenue or sales. Fixed assets turnover is a tool to find how efficiency one the firm’s

fixed assets to produce Markup / Interest revenue.

Fixed asset turnover ratio is calculated by:

Markup Or Interest EarnedFixed Turnover Ratio = ------------------------------------ Fixed Assets

2007 2008 2009

Markup Or Interest 44,100,934 / 50,569,481 / 60,942,798 /

37

Earned / Fixed Assets 9,861,974 25,922,979 24,217,655

Fixed Asset Turnover 4.47 1.9 2.5

Interpretation:

The comparison of fixed asset turnover ratio of NBP for three years shows that in

2007, NBP generates more interest from fixed assets as compare to 2008. But in 2009,

the ratio is again increased to 2.5. A unit investment in fixed assets produced 4.47, 1.9

and 2.5 rupees for the years 2007 to 2009 respectively.

vi) Net Profit Margins

This is the conservative method of sales profitability. This ratio gives a measure of

Net Income in dollars generated by each dollar of sales, i.e. it measures the firm’s

profitability of sales/ interest earned after taking account of all expenses and income

taxes.

This ratio is calculated by:

Net IncomeNet Profit Margins = -------------------------------------

Markup or Interest Earned

NBP NET PROFIT MARGIN RATIO

2007 2008 2009

Net Income / Markup or Interest Earned

17,022,346 /

44,100,934

19,033,773 / 50,569,481

15,458,590 / 60,942,798

Net Profit Margin 0.39 0.38 0.25

Interpretation:

The net profit margins of NBP for 3 years show that the net profit margin of the bank

is reduced. As it is was producing 0.39 cents from each rupee of markup earned in

2007 but it is decreased 0.01 cent in 2008. In 2009 it is considerably reduced to 0.25

cent of each rupee of markup earned. This may be due to the increase in the

administrative expenses and increase in taxations.

vii) Return On Assets:

38

Return on equity is the bottom line measure for the shareholders, measuring the

profits earned for each dollar invested in the firm's stock. This ratio shows the

efficiency of organization that how efficiently utilizes their assets. This ratio relates

profits to assets.

It is calculated as:

Profit after TaxReturn On Asset = --------------------------

Total Assets

Return on assets NBP is given below:

NBP RETURN ON ASSETS

2007 2008 2009

Profit after taxes / Total Assets

17,022,346 / 635,132,711

19,033,773 / 762,193,593

15,458,590 / 817,758,326

Return On Assets 0.027 or 2.7 % 0.025 or 2.5% 0.019 or 1.9%

Interpretation:

The return on asset of NBP is reduced in 2009 as compare to the year 2007 and 2008.

This shows that NBP is employing more assets in 2008 to generate one rupee of

profits after paying all the taxes.

viii) Debt to assets ratio:

This ratio shows that to which extent the organization assets are financed by debit.

This ration is directly related to risk high ratio means high risk and low ratio means

low risk. This ratio is high because of more deposits in the bank, and deposits are the

liability of customer on bank

It is calculated as.

Total debt Debt to assets ratio = ------------------

Total asset

Debt to Asset ratio for NBP for the years 2007 to 2009 is given below:

NBP DEBT TO ASSETS RATIO

2007 2008 2009

Total debt / Total Assets 553,178,593 / 635,132,711

645,855,939/ 762,193,593

715,299,108/ 817,758,326

39

Debit to Asset Ratio 0.87 or 87% 0.85 or 85% 0.87 or 87%

Interpretation:

The debt to equity ratio for 2007 is 0.87, which is reduced to 0.85 in 2008. in year

2009 it is again increased to 0.87. Which means that 87% of the total assets is

financed by the debt or by the creditors. Or in other worlds we can say that in one

rupee total assets 87 paisa is financed by debt.

ix) Advances To Deposits Ratios:

This ratio shows that how much efficiently the bank advances the deposits of their

customer to borrower.

It is calculated as.

AdvancesAdvances deposit ratio = ------------------ Deposits

NBP ADVANCES TO DEPOSITS RATIOS

2007 2008 2009

Advances / Deposits 316,110,406 / 501,872,243

340,677,100 / 591,907,435

412,986,865 / 624,939,016

Advances Deposit Ratio

0.63 or 63% 0.58 or 58% 0.66 or 66%

Interpretation:

From above table and graph it is clear that the ratio is reduced in 2008 as compare to

year 2007 while it is going high in 2009, i.e. bank is advancing 66 paisa per each

rupee of deposit. Which means the efficiency on NBP is good and they use their

deposits efficiently in advancing to borrowers. Here high ratio is required. The other

side of the picture is that the people will think that is risky to deposit the money in the

bank.

40

Balance Sheet National Bank of Pakistan as at December 31st, 2007 to 2009.

2009 2008 2007

41

NATIONAL BANK OF PAKISTAN, INCOME STATMENT

As At December 31st, 2007 to 2009

2009 2008 2007

42

CHAPTER - 6

FINDINGS AND RECOMMENDATIONS

NBP is an effectively operating and profit making organization and carrying out its

activities under a specified system of procedure. The main regulatory body is State

Bank of Pakistan, which provides policy guidelines and ensures that the money

market operates on sound professional basis. The head office specifies the whole

procedure of function and operations. This procedure has been modernized with the

passage of time with a view to streamline the approach and underlying procedure for

effective overhauling of its own capabilities so as to bring them at par with

international practices.

Here I am giving some recommendations, which in my view can add some input for

efficiency and better performance of NBP as an organization in general and NBP

Main Branch Charsadda in particular. The recommendations are as follows:

6.1 RECOMMENDATIONS:

6.1.1 Professional Training

NBP staff lacks professionalism. They lack the necessary training to do the job

efficiently and properly. Although staff colleges in all major cities but they are not

performing well. For this purpose these staff colleges should be reorganized and their

syllabus should be made in such a way to help the employee understand the ever-

changing global economic scenario.

Banking council of Pakistan should also initiate some programs to equip the staff

with much needed professional training.

6.1.2 Transfer

Transfer is not properly carried out. Some of the employees are continually serving at

the same post. They are simply rotated at the same branch. Therefore it is

recommended that evenly rotation of every employee should take place after every

three years in different braches of the bank.

43

6.1.3 Promotion Criteria

The promotion criteria can be better implemented when the management can

understand even the small wattage of the person’s performance. The promotion

should include three things in my opinion and all of these should be given numbers.

The 1st thing is qualification the second thins is seniority and the third is performance

of the employee. All these should be given preference according to the order. The

career planning can be produced due to this idea.

6.1.4 Improve Technology

This branch has fax, telephones and computers. It is suggested that ATM (Auto Teller

Machine) facility. In this area an auto teller machine (ATM) is the need of the hour

businessmen can easily check their balance in the bank and also with draw their

money conveniently.

6.1.5 Rank Influence Should Be Avoided

Some times high rank officers come and want themselves to be given priority. In

these cases bank should strictly follow the rule of ‘first come first serve’. This will

maintain the trust of other customers that they are not neglected just because they

have no rank.

6.1.6 Promotional Strategies

The existing and proposed products have to be marketed by intensive promotion

through print and electronic media. Further detailed information about these products

must be available in all branches through broachers & pamphlets. Besides incentives

schemes, Seminars, Workshops, may be made regular feature by the bank and

participations in trade fairs etc. needs to be ensured for promoting the various

products of the bank.

6.1.7 Job Rotation

There should be Job rotation of employees, so that they should know about all

departments. This will enhance the capabilities of the employees, as due to change in

work they will escape monotony. This will refresh and motivate employees.

44

In the branch there were few seats, which were over loaded with work as compared to

other seats. So Job rotation is must, so that no body should be overburdened and due

to this their motivation level was not at the highest level.

6.1.8 Equal Distribution of Workload

The employees of the branch should be given equal workload.. No body should be

given undue relaxation. The personal contacts of some of the employees should not

spoil the environment of the branch.

6.1.9 Consumer satisfaction

The National bank of Pakistan has to improve services provided to the pensioners and

also they have to adopt scientific methods of paying utility bills. If the consumers are

satisfied from the service they will expand his business with the bank. Otherwise bank

will loose its customers. All this can be achieved just by imparting proper training to

employees.

6.1.10 Improve Filing System

The record of the bank is not maintained according to the approved format of the head

office. So the department heads should make it sure that that filing of the record is

done in the proper and systematic way. For this purpose the bank should utilize its

computer technology, to maintain highly reliable and proper information about all

kinds of transactions.

6.2 CONCLUSION

The importance of banks in the economy of any country is like a backbone, so the

state government decided to start the banking system in their country, and by their

own interference control them, secure them, and subsidize them according the

situation, and main purpose behind that is to facilitate their nation. So the government

of Pakistan has also a banking system, as a head or largest bank in Pakistan known as

“STATE BANK OF PAKISTAN” which is largest bank of Pakistan, this bank works

as the governmental department and its main function is to monitor all type of banks

working inside specially as well as outside the country.

National Bank of Pakistan is the second largest bank of Pakistan by all means;

National Bank of Pakistan is widely used as an agent for State Bank of Pakistan and is

45

also involved in commercial banking. National bank of Pakistan has a vital role in

Pakistan’s banking history as well as in the economy of Pakistan, so it has a great

significance.

At present the national bank of Pakistan has improving its internal and external

conditions, but due to the largest operations in Pakistan (because this is only bank

which must cover the backward regions of the country where no any other

commercial bank want to go) it still faces many problems, These problems are new

marketing strategies, organizational and management problems at the branches of

backward regions, and motivation. Another main problem is faced by the NBP is

labor unions because labor is most powerful because of CBA union which protect the

labor's all action even are getting unjustified advantages all above factors are causing

problems of banking functional and growth of banking is being resisted. Mostly

recruitment and promotions are under influence of political system of Pakistan, so

eliminate it or reduce as much as possible and make it on merit and transparent.

During my two months internship, I observed many things at the NBP such as its

working procedures, policies, and many other aspects of practical nature of a big

organization. On the basis of all these observations, I have come to the conclusion.

That the banking field is more competitive and dynamic now-a-days. There is a lot

financial institution working side by side. In this competitive environment the bank

must have to use more innovative and creative ideas so that to attract customer.

Taking care of these things the NBP have started computerized system through which

one can send money from one place to another in no time. Which is a good step

towards its improvement?

Like its major competitor it has also started ATM facility in many big cities due to its

customer are loyal to it. Its equity position is very strong and it can compete its

competitor in every aspect of banking. NBP is one of the oldest and more settled bank

of Pakistan in fact it remained in business of financial services for many years.

Despite all these facts there are some areas, which needs to be improved, like it

should focus on its organization structure, Equal distribution of work should be done

and bring professional people to all of its branches in order to meet the requirements

of a new era and to fulfill the needs of 21st century.

46

BIBLIOGRAPHY

i. http://www.nbp.com.pk

ii. Annual Reports 2007 to 2009

iii. Israr H. Sodium, “Practice and law of banking in Pakistan”, royal book

Company, Karachi, 1993,

iv. Israr, H. Siddiqi, “Practice & Law of Banking in Pakistan” 5 th ed, Royal Book

Co., Karachi, 1993.

v. Koontz, Harold and Heinz Weihrich. (1993). Management. 10th Edition.

Singapore: McGraw Hill.

vi. National bank of Pakistan, Brochures of Products & Services.

vii. James C. Van Horneand J.M. Wachowicz. J.R. 11th Edition, Fundamentals of

Financial Management. New Jersey: Prentice-Hall, Inc. p.150

viii. Bowlin, Oswald D. (1990) Financial Analysis. U.S.A: McGraw Hills

International.

ix. Block, Stanley B and Hirt, Geottrey A. (7th edition). Foundation of Financial

Management. Sydney: Ed Von Hoffmann Press.

x. M. Saeed Nasir, Money Banking and Finance

xi. Kottler Philip “Marketing Management” Millennium Edition Page 76.

xii. Fred R. David “Strategic Management Concepts Cases” 7th edition.

xiii. Meigs “Financial Accounting” 11th edition.

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